The ghost of Henry Kelliher

By Peter V O'Brien

Friday 30th July 2004

There was an obscure historical link between the sale of Burns Philp's yeast, bakery ingredients, and herbs and spices businesses and Asia Pacific Breweries' full takeover offer for DB Breweries.

The link was an "it cannot be done" attitude toward the late Sir Henry Kelliher's formation of the then Dominion Breweries in 1929 and the Graeme Hart-controlled Burns Philp takeover of food group Goodman Fielder last year.

Sir Henry's brewery venture was launched when the Depression was about to hit and against the fierce, "anything goes" tactics of the then New Zealand Breweries. The cheeky 33-year-old was expected to get his comeuppance but built a major company.

Hart bought into Burns Philp in 1992, 10 years after floating Rank Group (later privatised) when he also was in his early 30s. He found "a few skeletons" (his words) in the food company and saw a quick erosion of his investment's value.

Australian commentators jumped in to rubbish the Kiwi upstart, as noted here last year (Feb 7, 2003): "Hart's fate was assumed to be horrible after he bought into Burns Philp and had to weather a substantial share price decline. The company recovered, the share price soared and Hart was again deemed an investment genius."

It was also noted he seemed to have a penchant for debt-financing of acquisitions. He bought the privatised Government Printing Office in 1989 for $23 million with substantial debt-finance and later sold it at a good profit.

Debt-funding accounted for much of Burns Philp's acquisition of Goodman Fielder and led to credit downgrades for the former from ratings agencies Moody's Investors Services and Standard & Poor's. The agencies' assessments were based on factual analysis of Burns Philp's and Goodman Fielder's debt structures after the acquisition.

Moody's report also included some apparently opinions, including the view that "integration of GMF Goodman Fielder could be challenging, given GMF's size relative to Burns Philp's limited knowledge of GMF's business." The agency said its ratings incorporated the challenges of adding a large business that was dissimilar to Burns Philp's existing operation.

While it is probable some of Hart's moves can miss the bus (his NZ Dairy Foods and Kapiti Cheeses argument, for example; NBR Rich List 2004, July 2), there is nothing new in that.

Sir Henry also had his misses, but his hits were many and sufficient for his inclusion as a laureate in the NBR Business Hall of Fame 1998.

The "it cannot be done" attitude emanates from people who cannot do; rarely those who get out and do. Business is only one of many fields where people refuse to accept apparent negative odds but has the peculiarity of providing masses of numerical analyses and apparently proven theory to back the negative odds.

People who buck the odds in business are akin to those who shrugged off claims that a heavier-than-air machine would never leave the ground.

The supposed audacity of the 23-year-old Ronald Brierley (now Sir Ronald) in 1963 paid off as the years went by, despite the doubtful achievement of later Brierley Investments' controllers in eroding the company's fortunes.

Hard work, attention to detail, proper utilisation of assets, imagination and awareness of the importance of cashflow seem other attributes that separate business successes from the also-rans.

It could have been coincidence, convenience to his office or the hands-on attitude that resulted in the Dominion Breweries' founder taking a modest lunch each day in the company's Royal International dining-room in Auckland during the 1970s. He was then past 70 but seemingly taking a close interest in the room's activities.

Sir Henry's company eventually came under Brierley Investments' control before being passed on.

There was another rather obscure link between Sir Henry and Sir Ronald for those fond of trivia. The former was a director of Bank of New Zealand from 1936 to 1942 as a government appointee before its full nationalisation. Sir Ronald was chairman of the bank in later more difficult days.

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